EMV Chip Card Merchant

Chip Card Information for Merchants

Changes are coming

Debit and credit chip cards are coming, and merchants will be seeing a lot of them. Soon. There is a good reason for this change: These smart cards with a built-in computer chip give cardholders and merchants an added layer of security against point-of-sale fraud. The embedded chip makes transactions safer because it contains account data and issues a unique, one-time code each time it is used. That fights counterfeiting and card-present fraud that costs businesses and financial institutions billions of dollars a year. But for this heightened security to work, businesses need to install chip-enabled terminals that interact with a cardholder’s chip card to send the encrypted data across the payment network for verification and authorization.

Here’s how the chip card point-of-sale process works

Cardholders insert their card, face up and chip end into the chip-enabled device.

They leave the card in the device during the entire transaction.

Instructions on the screen guide them through the transaction and they either sign their name or enter a PIN as needed. They remove their card and take their receipt when the transaction is complete.

The magnetic stripe hasn’t gone away

Chip cards will still have a magnetic stripe on the back, which means they will continue to work in ‘swipe’ terminals, but the payments industry is strongly encouraging merchants to switch to chip-enabled terminals.

Purchases online and by phone haven’t changed

While chip cards and chip-enabled terminals combine to fight point-of-sale fraud, they don’t change the online or over-the-phone payment process. Consumers will provide card information as they have done in the past.

Frequently Asked Questions

What are chip cards?

A chip card – also called a smart card or an EMV card – is a credit or debit card that contains a microprocessor that enhances the security of cards during point-of-sale transactions. These cards, already is use in much of the world, use a security standard originally developed by Europay, MasterCard and Visa (EMV) as standard to fight card fraud resulting from theft, skimming and counterfeiting.

What should merchants be thinking about?

Briefly, here is a list of considerations:

The Oct. 1, 2015, liability shift could be costly for merchants who aren’t using chip-enabled devices for transactions.

The conversion to chip-enabled devices will require time for planning, testing and employee training.

There are likely to be some expenses involved, based on your business needs.

This can protect you from costly point-of-sale fraud.

More and more, consumers are expecting merchants to provide a secure transaction process.

Is there an important chip card date for merchants?

Yes, there is an important fraud liability shift on Oct. 1, 2015. After that date, merchants who have installed chip-enabled terminals that interact with chip cards are protected from financial liability for card-present fraud losses resulting from certain types of card fraud, including counterfeit fraud.

Are merchants required to switch to chip-enabled terminals?

No, it’s not a requirement but it could be costly if they don’t. That’s because of the liability shift. If the merchant hasn’t converted its payment devices to chip-enabled technology by October the merchant could be held liable for the costs of a fraudulent transaction if the person paying at the terminal has a chip card but has to swipe the magnetic stripe on the back of the card through an older terminal.

What if a merchant is using a chip-enabled device but a card contains no chip?

Chip cards will still have a magnetic stripe on the back, allowing cardholders to ‘swipe’ the card to complete a transaction. However, in this instance the card issuer would be liable for the cost in the case of a fraudulent transaction because the card doesn’t contain a chip but the merchant device was capable of processing a chip transaction.

Is there a reason this is happening?

The goal in the U.S. is that all debit and credit cards will be issued with chips and that all merchants will convert to chip-enabled devices. While the full process will likely take a few years, this combination is expected to significantly reduce card fraud at point-of-sale transactions, which has been the case in other countries that have already converted to chip cards. Chip cards already are in use in most of the rest of the world.

What does a chip card look like?

Chip cards have a metallic chip on the front. They also will still have a magnetic stripe on the back.

Are there other reasons merchants should have chip-enabled terminals?

Customers have become increasingly concerned about the security of card payments as they hear more about data breaches and the potential for credit and debit card fraud. In countries where chip cards and chip-enabled terminals have been in use, the incidence of card-present fraud has fallen. Knowing that their transactions and account information are more secure is reassuring to cardholders. The prospect of reducing the costs of card-related fraud should also be an incentive to merchants.

Are there costs involved?

There are costs involved in upgrading to chip-enabled devices, but those costs could be more than offset by reductions in fraud-related expenses. Merchants should contact their acquirer or payment services provider to get details about device options, costs and other requirements for making the conversion. Depending on the device, a variety of payment methods can be accepted, ranging from contact to contactless.

Will making payments at a chip-enabled terminal take longer?

Yes, the payment process will take a bit longer. Rather than swiping their debit or credit card, cardholders will insert the chip card into the card-enabled terminal and leave it there during the full transaction. That allows communication between the card, the terminal and the payment networks to verify the card and authorize the transaction. The cardholder will either sign their name or enter their PIN as necessary to complete the transaction, based on the determined cardholder verification method.

Will employees need to be trained?

Yes. It is essential that employees know how the process works for the merchant and so they can assist cardholders during a transaction as necessary. Merchants should talk to their acquirer or payment services provider about training options.

Can chip cards be used anywhere?

Yes. Chips cards can be used virtually anywhere a particular brand of card is accepted in the U.S. and around the world. Chip cards will work in both chip-enabled and swipe terminals. If a cardholder tries to swipe a chip card in a chip-enabled terminal, they will be prompted to insert the card to complete the transaction. If a terminal is not chip-enabled, a chip card can still be swiped to read the magnetic stripe on the back to complete the transaction.

What is the difference between chip and signature and chip and PIN?

Depending on the card and the transaction, cardholders may be asked to provide either a signature or a PIN to complete a transaction. Some transactions could be completed without either a signature or a PIN.

Will chip cards prevent data breaches?

While chip cards won’t prevent the types of data breaches that have hit some merchants, they do make it extremely difficult and costly to produce counterfeit cards from that stolen data, and since each chip card transaction is unique, a specific transaction number can’t be used again.

What about online and phone transactions?

These card-not-present transactions don’t change, and chip cards don’t make them more secure.

How long does conversion to chip-enabled terminals take?

Merchants will need to contact their acquirer or payment services provider to assess their needs; determine costs; establish timelines for installation, testing and staff training; and then implement the conversion in a way that is best for them.

How will customers know that a merchant is using a chip-enabled device?

There are a variety of ways to communicate with customers, ranging from employee communication, to point-of-sale signs, to announcements on your website or via social media. It’s also important that employees are trained so they know how to help customers.

Contact us for more information

Call us at 719-589-6653 or stop in if you have additional questions about chip cards, or if you are interested in opening an account.